Advantages of 3PLs as healthcare supply chain orchestrators

Given the expansion of the COVID-19 cases and the average infection rate globally, constructing a robust healthcare supply chain system for the crisis is highly crucial. The third-party logistics providers (3PLs), who can match the market demand with reliable manufacturers worldwide, have emerged as orchestrators. In addition to the basic transportation and storage services, some 3PLs can also provide procurement assistance to relatively small retailers. To illustrate the value of the above-mentioned business model, we build a game-theoretic model to capture participants’ optimal strategy in a healthcare supply chain consisting of a manufacturer, a 3PL provider, and a retailer. We also investigate the conditions where the performance in this business model outperforms the traditional model. It is concluded that the 3PL’s positive effect appears when the decentralized supply chain is characterized by high logistics outsourcing costs and high-level price sensitivity. We further design an incentive mechanism that can coordinate the supply chain. Finally, a series of numerical experiments are carried out to demonstrate the effectiveness of our model.